Rate of Gross Profit = (Gross Profit/Net Sales) X100
Now in this question rate of gross profit is given. Obviously it means the percentage of gross profit from sales. In the question we are not given the figure of sales but we are given the figure of 'Cost of Goods Sold. In simple language COGS means the cost of those goods which have been sold. Let us now learn to calculate rate of gross profit on cost of goods sold.
Let the sales price be = 100
Less Profit (25%) = 25
Cost of goods sold = 75
Rate of profit on cost = (25/75) x 100 = 33.33% or 1/3 of cost.
Cost of goods sold = Rs.180000
Gross profit (33.33%) = Rs.180000 x33.33/100 = Rs.60000.
Sales = COGS + Gross Profit = Rs.180000 + 60000 = Rs.240000.
Sometimes it may happen that you are given the figure of Sales and Rate of Gross Profit on Cost of Goods Sold. For example, calculate the amount of gross profit on sale of Rs.240000 if rate of gross profit on cost of goods sold is 25%
Let cost of sales by = 100
Add profit = 25
Sales = 125
Rate of profit on sales = (25/125) x 100 = 20%
Sales = Rs.240000
Gross Profit on sale = Rs.240000 x 20/100 = Rs.48000.
I am giving below a thumb rule for conversion of rate of gross profit from sales to cost of goods sold and vice versa:
Convert the rate of gross profit from percentage to a fraction, for example 20% to 1/5. While converting from Sales to Cost subtract 1 from the denominator. Similarly while converting from Cost to Sales addt 1 to the demoninator.